Economy: Cautious optimism trails marginal increase in oil price

There seems to be a general optimism, though cautious, over Friday’s upsurge in the prices of crude in the international market.

After selling below the $30 mark, the Brent North Sea crude reached $38.72 a barrel, the highest level since early January while the US benchmark West Texas Intermediate hit a two-month high of $35.94.

According to reports, the surge in prices of commodities may not be unconnected with
positive US jobs data.

It would be recalled that prices of crude recently went near 13-year low below $30 a barrel with the Nigerian economy severely hit by the downturn. However, there has been renewed hope in government circles that the worst days for the Nigerian economy maybe over with the rebound in prices, a trend they expect to continue.

This optimism is fueled by the ongoing efforts to convince members of Organization of Petroleum Exporting Countries, OPEC, and other major producers outside OPEC to take production cuts and allow prices to rally further.

An analyst with Commerzbank, Carsten Fritsch said “The price rise was boosted by reports of declining supply” from OPEC and the United States.

“What is more, efforts are ongoing to persuade other countries to cap their oil production, as Saudi Arabia, Russia, Venezuela and Qatar (have) agreed to do.”

It will be recalled that the Nigerian President, Muhammadu Buhari, has been in the fore front of encouraging other OPEC members to work towards improving the situation in the crude oil market. His shuttle diplomacy has taken him most recently to Saudi Arabia and Qatar amongst other places.

Read also: NSE LIVE! Equities rebound as crude oil price firms up

Following President Buhari’s troubleshooting efforts, the Minister of State for Petroleum, Dr. Emmanuel Kachikwu, disclosed on Thursday that key crude producers plan to meet this month in Russia to discuss a proposed output freeze.

According Kachikwu, there would be a “dramatic price movement” after the March 20 gathering.

The optimism being expressed in diffetent circles, especially those in government, notwithstanding, analysts believe it is still too early in the day to rejoice. This, they said is because not all OPEC members or major producers will accept taking production cuts.

According to them, a country like Iran, who had just come out of international sanctions, will not be willing to accept a cut in favour of prices.

Reports have already indicated the direction and thinking of the middle east country, whose officers have reportedly said accepting production cut will be suicidal for them.

With this in mind, it is yet to be seen what impact Friday’s upsurge will have on the Nigerian economy and how long and consistent the upward movement can be.

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